Secretary of State John Kerry has used a farewell speech to outline his proposals for a peace settlement between Israel and the Palestinians.

Mr Kerry’s speech on Wednesday comes days after the US refused to veto a United Nations Security Council resolution that called Israeli settlements in the West Bank and east Jerusalem a violation of international law.

Israeli Prime Minister Benjamin Netanyahu has slammed the resolution and accused the US of colluding with the Palestinians in drawing it up.

Mr Kerry rejected criticism that the vote abandons Israel. He said it’s Israel’s policy allowing permanent construction of settlements in the West Bank and east Jerusalem that risks isolating Israel from other nations.

Mr Kerry also said the US “did not draft or originate” the UN resolution condemning the settlements, “nor did we put it forward” in the UN.

Expanding Israeli settlements in the West Bank and east Jerusalem are leading to an “irreversible one-state reality”, despite polls showing that most Israelis support the creation of a separate Palestinian state.

Mr Kerry also said people in Israel are unaware how systematic the settlement process had become in recent years, with tens of thousands of Israelis moving into the middle of Palestinian territories.

Israeli artist Itai Zalait with his statue of Israeli Prime Minister Benjamin Netanyahu, made as a protest against the PM and placed without official permission outside Tel Aviv’s city hall. Photo: Getty.

Mr Kerry outlined a series of principles he says could form the basis of a future peace accord and that there must be a two-state solution that includes a “secure and recognised border”.

Stay strong Israel: Donald Trump

Meanwhile, President-elect Donald Trump chipped in, criticising the Obama administration for its stance on Israel.

“We cannot continue to let Israel be treated with such total disdain and disrespect. They used to have a great friend in the U.S., but…….,” Mr Trump, a Republican, wrote on Twitter on Wednesday.

We cannot continue to let Israel be treated with such total disdain and disrespect. They used to have a great friend in the U.S., but…….

— Donald J. Trump (@realDonaldTrump) December 28, 2016

not anymore. The beginning of the end was the horrible Iran deal, and now this (U.N.)! Stay strong Israel, January 20th is fast approaching!

— Donald J. Trump (@realDonaldTrump) December 28, 2016

An agreement must help Palestinian refugees, designate Jerusalem as a capital for both states and satisfy Israel’s security needs, Mr Kerry said.

The top US diplomat is leaving office next month along with President Barack Obama.

Mr Kerry said if Israel rejects a two-state solution for peace with the Palestinian people, “it can be Jewish or it can be democratic”.

A senior Israeli Cabinet minister, Gilad Erdan, called Mr Kerry’s speech a “pathetic step,” further heightening tensions between the two close allies as Obama prepares to leave office.

Israeli leaders have made no secret they are counting on Mr Trump to change US policy.

A prominent Israeli opposition politician has given a warm reception to Mr Kerry’s Mideast policy speech.

Yaakov Peri, a former chief of Israel’s Shin Bet security agency, praised what he called Mr Kerry’s “balanced speech, based on reality and facts”.

Peri says the secretary of state drew attention to the “harsh and dramatic consequences” of a single bi-national state.

Peri is a member of the centrist Yesh Atid party, which sits in the opposition. But his words carry significant weight given his experience battling Palestinian militants.